True Ventures Raises $205 Million Fund

Michael Appleton for The New York TimesAn enthusiast in Brooklyn examining 3-D plastic art from a MakerBot Industries printer. True Ventures is an investor in MakerBot.

While Facebook’s sagging stock price may have chilled investors’ appetite for rising technology start-ups, some venture capital firms continue to collect new money.

True Ventures, an early stage venture capital firm with investments in Automattic, the parent company of WordPress.com, and MakerBot Industries, has raised $205 million for a new fund. It took only eight weeks to close the fund, amid strong investor demand.

It is the latest firm to close a new fund, despite continuing challenges in the broader venture capital industry. Last month, for instance Kleiner Perkins Caufield & Byers, raised $525 million for its 15th early stage fund. And this week, the Madrona Venture Group announced the close of a $300 million fund, its largest to date.

But the bulk of the industry is hurting.

In the first quarter, venture firms raised $4.9 billion, a 35 percent drop from the period a year earlier, according to a recent report by Thomson Reuters and the National Venture Capital Association. Most of that capital was concentrated at the very top, with five firms accounting for nearly 75 percent of the total.

A lot of the money raised was earmarked for early stage investments, heightening competition in the already crowded strata.

Before Facebook’s I.P.O., there were plenty of checks chasing early deals, from traditional venture capital firms, young boutiques and a growing class of so-called angel investors, many of whom are founders-turned-investors.

Although it is still not clear how Facebook’s I.P.O. — and the ho-hum performances of other recent Internet darlings like Zynga and Groupon — will affect early stage investing, many start-ups are now tightening their belts and recalibrating their expectations.

For venture firms that have managed to raise money, like True Ventures and Kleiner Perkins, the choppy environment is both a blessing and a curse. While their portfolio companies may find it difficult to raise additional capital to expand their businesses, venture capital firms may find it easier to make new investments at reasonable valuations as competition wanes.

“We’ve got exposure on both sides of the equation,” said Phil Black, a partner at True Ventures. “I think it’s an opportunity to be more active.”

True Ventures, founded six years ago, is one of the newer entrants in the venture capital industry. Backed by investors like the Barclays UK pension fund and Top Tier Capital Partners, the firm has raised $600 million across three funds. The firm plans to invest the latest fund over 3 to 4 years, in $250,000 to $3 million chunks. (The New York Times Company is an investor in True Ventures.)

Like Andreessen Horowitz and Spark Capital, True Ventures was started by a team of venture capitalists and entrepreneurs, and that fact is reflected in its their strategy. While other firms may spend more time evaluating a start-up based on its financials or market fit, True Ventures places a greater emphasis on the merits of the founder.

“Everything we do stems from the belief that great entrepreneurs are the center of the business,” said Jon Callaghan, a partner at True Ventures. “We’re not just concentrated on funding one business of an entrepreneur, but the entire career of an entrepreneur.”